1. Field of the Invention
Applicant's invention relates to electronically encoded "coin cards" and their use as currency substitutes in monetary transactions.
2. Background Information
Small transactions involving monetary exchanges of less than about $2.00 present inconveniences not thus far adequately addressed by the drastic changes to the ways in which Americans carry out their purchasing transactions as brought about by the proliferation of credit cards, checks, ATM cards, etc.
From the purchaser's point of view, there still exists a practical need to carry noisy, weighty, pocket-fraying and easily misplaced coins if one is to effect day-to-day, small-value transactions such as purchases of chewing gum, candy bars, soft drinks, coffee, telephone calls, newspapers, transit tokens, etc. Further, there is a stigma, or at least informal pressure by proprietors, associated with using a credit card or check in such small amount transactions. A purchaser (or would-be purchaser) who lacks a cache of coins tends to either forego such transactions altogether, or to purchase items which he or she would not have otherwise purchased in order to raise the total transaction value to a "respectable" amount.
From vendors' point of view, small value transactions which involve coins (or which, because of the amounts involved, seem most appropriate for coins) present many problems which seem far out of proportion to the value of the transactions. These problems include: (1) time-intensive and error-prone coin counting steps at each transaction and at register closing time; (2) coin management including wrapping coins and transporting coins to banks; (3) the time and paperwork expense associated with customers who actually do use credit cards or checks for &lt;$1.00 transactions; (4) the cumulative effect of numerous customers being "just a few cents short" in their pocket change; (5) loss of sales to customers who neither have adequate pocket change nor are willing to use credit cards or checks for such purchases; and (6) theft--particularly in the case of vending machines.
Even for consumers who do not routinely make small-value transactions as described above and/or who prefer not to carry coins there still exists a substantial inconvenience arising from the present lack of an acceptable coin substitute--getting change back from cash transactions involving any transaction amount other than an even-dollar amount. Unless one is prepared to leave his or her change with the proprietor, all but even-dollar cash transactions will send a consumer from a store with coins in the pocket or purse.
The magnitude of the inconveniences described above can only be appreciated in light of statistics such as the immense volume of coins in circulation in this country. At present, there are some $7.4 billion in coins in circulation according to the U.S. Treasury Department. Further illuminating is the fact that just one of the many coin-intensive facets of our economy--the vending and amusement equipment industry--generated $33 billion dollars in sales in 1991 alone. Adding to this amount the almost incalculable number of coins 12 involved simply in "giving change" in cash transactions begins to demonstrate the collective inconvenience borne by Americans for lack of a substitute for coins, a substitute which is truly acceptable from social, practical, and economic viewpoints.
While some basic building blocks exist for a practical and universal coin substitute system, and while long-felt need for such a system is self-evident, no one has thus far recognized or made the appropriate assemblage or necessary modifications to those building blocks to effectuate such a system. For example, the heart of Applicant's system and associated methods--the coin card--is well known and used in many cash substitute transactions. A particularly relevant example is that of France's "TELECARTE" system for use with public phones. Users of public phones in France must purchase coin cards in order to use the phones--in most cases the phones simply do not accept cash. Each telephone coin card is encoded with data representative of a particular monetary equivalent according to a standard data protocol. Vendors of the cards pay a discounted rate to the French telephone company for each card, and generate profit from the sale of the cards, at face value, to public phone users.
Each phone includes a coin card reader/writer which first reads the card's initial value to establish available credit for the user's phone call and, upon completion (or termination) of the call, to record data into the card's memory reflective of a lower (or exhausted) card value.
Other known uses of coin cards as cash substitutes are associated with photocopy machines at universities and with prison commissary systems. All such uses, however, are in the context of "closed systems". In other words, the issuer of the card is also the exclusive vendor of the goods or services to be purchased with the cards. Lacking any universality in the marketplace, coin cards purchased for use in such closed systems merely augment the cash and cash substitutes carried by their users for other transactions. A user of one of these closed system cards will still tender, and will inevitably receive many coins as part of cash transactions outside of the closed system. Examples of closed systems include Pusic, U.S. Pat. No. 4,900,906, Ushikobo, U.S. Pat. No. 4,879,540, and Capers, U.S. Pat. No. 4,669,596. None of these patents discloses a plurality of coin card reader/writers and a clearing center processor. These features are essential to a system that permits universal acceptance of a single coin card by multiple vendors. Without these features, coin cards have limited consumer appeal because a consumer who desires to be rid of the problems associated with coins discussed above will have to carry a wallet full of coin cards for each closed system from which he makes purchases.
In sharp contrast, by providing for a clearing center processor and a plurality of coin card reader/writers, the present invention permits the consumer to carry just a single coin card which will be accepted by multiple vendors and vending machines. With the system of the present invention, a practical, universally accepted alternative to coin transactions is disclosed.
It is the concept of great numbers of proprietors from every facet of commerce, each With a reader/writer and transaction register units configured for use in Applicant's transaction system and linkable with a central clearing center for payment processing, which lies at the heart of Applicant's invention. By affording universal acceptance of pre-paid coin cards for purchase transactions as made possible by this concept, it will be realistically possible to eliminate coin usage from consumer's day-to-day transactions.
Some have proposed apparatuses which seem to be directed to more universal use of coin cards in consumer transactions (see U.S. Pat. No. 4,877,947 issued to Mori, for example). Such systems do not, however, provide or suggest system or method components which permit an actual system of transaction processing to be feasible. For example, Mori proposes a machine which debits a user's coin card and credits a proprietors coin card, generally suggesting that his machine will make coin cards more universally applicable to purchase transactions.
Mori suggests taking the proprietors' coin card to banks, etc. for processing. Mori falls well short of providing the complete system by which consumers will come to have coin cards with value which is transferrable to proprietors which, in turn, is transferrable (either directly or through intermediaries) to services who hold funds initially paid for the cards in exchange for actual monetary compensation. Also, the apparatus and methods suggested by Mori present an inconvenience factor (having to physically take or send coin cards to payment processing services) which likely will render the system, even if integrated in a workable transaction system, not sufficiently attractive to proprietors to generate wide-spread use. Just the time delay alone in this step will deprive proprietors of funds for times which cumulatively deny the proprietor use-of-funds to a significant degree. Furthermore, relying, as Mori's system does, generating and having to transfer a physical object representing intrinsic value from one location to another presents security concerns.
Although present day credit cards and automated teller machine cards involve systems that are not closed, systems employing these techniques have the drawback of requiring "on line" capability. In other words, credit card systems and ATM machines must verify, at the time of the transaction, that the card holder has sufficient purchasing power to complete the transaction. Aside from requiring a time consuming electronic verification, these on-line systems require that a telephonic link with the central processing center to be constantly maintained. If a power outage or any other problem with the communications system is encountered, on-line transactions cannot operate.
The present invention, on the other hand, does not require an external communication with the central processing center for each sales transaction because the coin card represent actual and available purchasing power. There is no need to verify funds with a third party institution as is required for transactions involving credit cards or ATM cards.
Instead, the present invention provides for information transfer requires only that the transaction information stored on each coin card reader be electronically transferred to the central processing center periodically, at the end of each business day, for example. By not requiring fund verification at the time of the transaction, an off line system, such as the present invention is immune from potential problems with the communication hardware and with the central processing system's hardware. If, for example, a telephone wire is down for several hours, consumers and vendors can continue to make coin free transactions using the present invention. Only at the end of the day, when the vendor desires to transfer the days transaction information to the central processing center is a communication link required.
The entire system can be most easily understood by following the path of money through the system. A card issuer will sell coin cards, encoded for certain indicated face values, to distributors (grocery stores, banks, convenience stores, post offices, etc.) for a discounted price. The card issuer places the proceeds from initial card sales in interest bearing accounts. It is possible that market realities may dictate that some cards are placed with distributors on a consignment basis, rather than a pre-paid basis, but this is obviously a far less attractive alternative to card issuers.
Card distributors will sell the coin cards to consumers at face value thereby deriving the profit necessary to motivate their participation.
When purchasing goods and services from vendors who have system reader/writer and transaction register units, consumers will present their coin cards either (1) completely in lieu of cash; (2) to pay portions of transactions for which they lack adequate cash; or (3) to supplement their cash by an amount which covers other than even-dollar portion of their transaction total or which generates only even-dollar change. Two examples of this third option are instructive: